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SEMESTER FALL 2019
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FORECASTING & BUDGETING (ECO602)

MARKS: 15

ASSIGNMENT:

Question 1

ASSIGNMENT NO. 2

Suppose MAC Estate & Builders Company is considering an investment project which requires initial investment of Rs.950,000. Annual cash inflows of this project from year 2019 to year 2024 are given in the following table.

Years | Annual cash Inflows (Rs.) |
---|---|

2019 | 150,000 |

2020 | 180,000 |

2021 | 200,000 |

2022 | 250,000 |

2023 | 270,000 |

2024 | 280,000 |

Calculate net present value using 5% discount rate. Also suggest whether the project is acceptable or not.

Question 2:

Suppose PAIR Investment Company limited is working on a project whose profitability index value is 5. The present value of cash inflows of this project is Rs. 20,00,000. Calculate the present value of cash outflows of this project from given information.

Question 3:

Suppose a firm has two investment projects, A and B, under consideration. Data on Accounting Rate of Return (ARR) and Required Rate of Return of both projects is given

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in the table below:
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Projects | Accounting Rate of Return (ARR) | Required Rate of Return |
---|---|---|

A | 75% | 60% |

B | 55% | 60% |

Consider the given data and logically discuss the firm’s decision about investment in projects A and B.

(Marks: 5+5+5)

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Note related to load shedding: Please be proactive

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